Profits Jump at MGM on One-Time Gains

Published 7:00 pm, Tuesday, February 4, 2003

Profits at movie studio Metro-Goldwyn-Mayer jumped 50 percent in the fourth quarter on the strength of several one-time gains.

For the quarter ended Dec.31, MGM reported net income of $58.7 million, or 24 cents per share, compared to $39 million, or 16 cents per share in the same quarter last year.

More than half of its profit was from a one-time gain of $32.5 million, MGM's share from the sale of the Bravo cable channel to NBC. MGM had a 20 percent stake in the channel, which was owned by Cablevision. The results also included a gain of $13.2 million from the settlement of a dispute with a vendor.

Excluding the gains, MGM's net income would have actually dropped about 66 percent to $13 million, or 6 cents per share, a penny less than the 7 cents per share that had been expected by analysts surveyed by Thomson First Call.

MGM shares fell 18 cents to close at $9.85 on the New York Stock Exchange.

Revenue soared 65 percent to $621 million from $376 million in the same period last year. Revenue was helped by box office results of the James Bond film "Die Another Day," which has earned more than $150 million domestically since it opened last November _ a record for a Bond film. MGM said it expects worldwide box office receipts to reach $425 million.

For the full year, MGM reported a net loss of $142 million, or 57 cents per share, compared with a loss of $438 million, or $1.89 per share, in 2001.

Revenue for the year increased 19 percent to $1.654 billion from $1.387 billion in 2001.

During 2002, MGM's shipments of DVDs increased 79 percent as worldwide shipments of DVD and VHS programs crossed the 100 million mark for the first time, the company said.

Revenue increased as MGM's slate of feature films fared better at the box office and the company expanded its production of television programs for cable and broadcast. MGM's "Stargate SG1" is the highest rated original series on the Sci-Fi Network and has been renewed for a seventh season.

The company, based in Santa Monica, is also planning to produce a series based on the 2001 hit "Legally Blonde" for ABC Television, most likely for mid-season 2004. A TV version of last year's hit "Barbershop" is also in the works for NBC. Both movies have sequels hitting theaters in 2003.

MGM said it is looking for ways to use the nearly $600 million in cash it has on hand, including making an acquisition, buying back stock or even, if the stock price continues to slide, taking the company private.

"Our focus has been on actually growing the company _ growing the revenue streams, giving the company more scale, being more vertically integrated and increasing the public float," MGM chairman and chief executive Alex Yemenidjian said during a conference call in response to an analyst's question. "However, given current world economic and geopolitical conditions, I think it's not smart for anyone to rule anything out."

Last month, billionaire Kirk Kerkorian sold 25 million of his MGM shares, reducing his ownership in the company to 65 percent.

MGM said reiterated that it expected revenue and cash flow to increase next year, although earnings would continue to be depressed as MGM amortizes the cost of acquiring various film libraries. The non-cash charge is an accounting requirement and does not reflect the company's growth or outlook, MGM said.

For 2003, MGM said revenue would increase from between 3 percent to 5 percent to more than $1.7 billion. A net loss of between 28 cents and 38 cents per share in 2003 is anticipated because of amortization costs, which could reduce earnings by as much as 36 cents per share.